Enhancing alliance VfM

In this section, the conclusions relevant to enhancing VfM at the alliance level are discussed. These topics are those that could add benefit to each project independently.

Alliance projects are often associated with uncertainty and complexity. This requires greater, not less, rigour in the business case to ensure that adequate anchoring, benchmarking and guidance is provided to the alliance team as the project progresses.

As a minimum the business case should include the value proposition which incorporates the project objectives, agreed funding of 'externalities' (for example environmental works, stakeholder relations) and a robust cost plan. It should (barring sections subject to confidentiality) be made available to the alliance team.

Procurement strategy should be selected on the basis of the project characteristics. The selection of the alliance delivery method to attract scarce resources or to start the project earlier may not be appropriate if the associated price premium is considered. This premium may be acceptable if the risk profile of the project is high, however, for lower risk projects the premium may be excessive.

The selection criteria used for selecting the NOPs should encourage innovation and efficiency. Although not always appropriate, price competition can achieve this by providing productive competitive tension. The selection process should not be overly prescriptive that it stifles NOP's ability to provide technically and commercially innovative offers.

Although the philosophy of alliancing is non-adversarial, the alliance is a commercial transaction and the alliance legal agreements (PAAs) must be appropriate to that commercial transaction.

The complex nature of alliances can result in Owners being exposed to serious asymmetry of information, commercial capability and capacity in their engagement with the NOPs. Owners should ensure that any asymmetry is identified and addressed to enhance VfM outcomes. The exposure of Owners can be increased when there is no price competition as there has not been the 'traditional' competitive tension which can alleviate such asymmetry.

Effective alliance governance is critical to project success. The alliance delivery method is mature and an optimum governance structure needs to be researched, defined and applied. In particular it is important in an alliance that decision rights are clearly articulated, particularly the role of the government vis a vis the Owner and the Owner's representative.

Through project delivery, the Owner may be exposed to continued commercial asymmetry. It is important that the Owner establishes capability to represent its interests in the alliance at a level commensurate with the commercial capability of the NOPs.

Outstanding outcomes ('paradigm shift', 'not been done before') are often sought by Owners when selecting the alliance delivery method and they are generally a requirement in the PAA. However, there was little evidence that outstanding outcomes are being achieved despite significant investment in 'high performance teams'. There is little point in pursuing outstanding outcomes if they are not required to satisfy business case objectives.